Top Ten Union Corruption Stories of the Year

As in 2014, union leaders last year directed much of their energies toward maximizing political and legal advantage. And they scored tangible victories. President Barack Obama, now in his last year in office, is without question the best White House friend of organized labor in decades. Among other things, unions won major cases before the National Labor Relations Board (NLRB), with its built-in 3-2 Democratic Party majority. And the Teamsters achieved its long-sought goal of release from federal control established following a 1989 civil racketeering settlement. Yet organized labor also experienced its share of setbacks, especially in the courts. And they received lots of unwanted exposure for embezzlement and fraud. As far as rank and file members are concerned, the most pressing problem is the growing possibility that their pension plans will be depleted.

The NLRB delivered two indisputably enormous victories for labor. As discussed at length last January, the board the previous month had issued its long-awaited final “ambush election” rule, which despite an employer challenge, went into effect in April. The regulation dramatically reduced the number of days available to an employer in which to challenge a union organizing campaign. Unions now have an extra edge in card check and election campaigns. Equally crucially, the board ruled in Leadpoint, a case originating at a Northern California recycling plant, that if a subsidiary of a major company is involved in a collective bargaining dispute, the parent company must negotiate alongside the subsidiary even if it has little or no involvement with the setting of wages, benefits and working conditions. The decision has special implications for the fast food industry, where most outlets are franchisee-owned.

In other arenas, union power over individual workers and the general public eroded. Most importantly, the U.S. Supreme Court last June agreed to hear the case of Orange County, Calif. public school teacher Rebecca Friedrichs and her co-plaintiffs against the California affiliate of the National Education Association. If they win, the mandatory public-sector union shop could be facing its last days. No longer would school teachers and other state and local employees be forced to pay union dues, whether full or partial, as a condition to stay employed. In a related development, the Wisconsin legislature, at the urging of Governor Scott Walker, enacted a Right to Work law barring private-sector labor unions from inserting clauses into collective bargaining contracts forcing employers to fire non-paying workers. In Pennsylvania, lawmakers enacted a proposal to repeal an exemption for unions from anti-stalking laws. The law was prompted by well-founded reports that an Iron Workers local in Philadelphia had been vandalizing nonunion construction sites, and intimidating workers and contractors. And in Arizona, the state Court of Appeals, affirming a lower court decision, ruled that a prior arrangement committing the City of Phoenix to compensate local police for union activity was grossly excessive. The ruling may prove useful in combating the well-documented and often abusive practice of public-sector unions inserting “official time” clauses into contracts.

A good many union bosses, office employees and business agents were caught with their hands in the cookie jar, often after years of getting away with it. Among the more dramatic examples: In Maryland, a Laborers local business manager, working with co-owners of a construction firm, allegedly diverted more than $1.7 million in union funds to personal and political use; in New York City, three union bosses, two from the Allied Novelty and Production Workers and the other from the Teamsters, were indicted for kickbacks and thefts in excess of $1 million from union benefit plans; a United Food and Commercial Workers organizer in Northern California was indicted for receiving $500,000 from marijuana dispensary operators in return for advice on how to avoid being unionized; the comptroller of a Carpenters regional council in Michigan was charged with stealing $500,000; and a family in the Inland Empire area of Southern California was indicted for looting their union to the tune of around $900,000.

The biggest cases of union abuse of power didn’t necessarily involve criminal lawbreaking – as far as we know anyway. The Coli extended family, for many years a controlling force in Chicago-area Teamster affairs, had a lot of unexpected, and unwanted, publicity. Investigative reports revealed a consistent pattern of shady business deals, often with the tacit cooperation of Teamster top brass and political leaders. Last July, a Cook County judge ruled that family patriarch John Coli Sr. and a Teamster local were jointly liable for $2.3 million for breaking a building lease. Speaking of the Teamsters, that union’s Central States Pension Fund, which covers about 400,000 current and future retirees, more than ever is on the road to bankruptcy. And if that happens, as a September report revealed, its federal backstop, Pension Benefit Guaranty Corp., may also need a public bailout after satisfying claims. The news also was grim for union-driven public employee retirement plans in the states of Illinois and New Jersey, where assets lag well behind liabilities. As the Washington, D.C. axiom goes, the real scandal is what’s legal.

The following, in reverse order, are the top ten union corruption and aggression stories for 2015, plus the most noteworthy dishonorable and honorable mentions:

10) Police union chieftain in Florida pleads guilty to receiving $570,000 from illegal storefront gambling enterprises. Nelson Cuba, former president of the Jacksonville Fraternal Order of Police, helped himself to revenues generated by Internet café gambling operations in the northern part of Florida, using a military veterans’ charity as a conduit. Participants in the ring skimmed about $300 million until busted by state investigators. More than 50 persons were arrested; almost all pleaded guilty, including former Jacksonville FOP Vice President Robbie Freitas. While there is a libertarian case for legalizing storefront gambling, neither cops or unions representing them have a right to profit from such activity at the expense of veterans.

9) Public-sector union employees make extensive use of “official time.” Government employee unions at the federal, state and local levels during the past several years have taken off from work to conduct union business. And they’re getting paid to do it. This practice, known as “official” or “release” time, isn’t illegal. Yet taken to excess, it represents a breach of the public trust. Last year it got some overdue pushback. Rep. Jody Hice, R-Ga., introduced legislation to ban the use of release time for the unionized federal work force. In addition, the Competitive Enterprise Institute released a report on use of union release time among workers in Missouri state and local agencies, revealing costly public subsidies – and an alarming lack of cooperation by the agencies. Studies in each of Texas, Michigan and Fairfax County, Va. also revealed rising costs of publicly-funded union activism. And the Arizona Court of Appeals, affirming a lower court decision, ruled that a Memorandum of Understanding forcing the City of Phoenix to compensate local police for union activity was grossly excessive. These events were all to the good. Unions, public- or private- sector, are private organizations. Taxpayers should not have to cover the costs of their meetings.

8) New York City labor bosses charged in $1 million+ scam. Benefit plans in recent years have provided numerous lucrative opportunities for union scam artists. This was a good one. Last July three local union officials in New York City, two from the Allied Novelty and Production Workers and one from the Teamsters, were arrested and indicted in federal court on charges of obtaining illegal kickbacks or stealing a combined more than $1 million from union health plans. For about a decade, the defendants, each a plan trustee, extracted payments from a third-party administrator in return for allowing the administrator to retain the management contract.

7) Maryland LIUNA business manager, two others charged in $1.7 million ripoff. The Laborers International Union of North America has had its share of corruption among its local affiliates in recent years, but arguably none this brazen. Three men in suburban Maryland near Washington, D.C., the business manager of Laborers Local 657 and two co-owners of a building contractor, were indicted by a federal grand jury in October for theft, fraud, money laundering and bribe-taking related to the disappearance of more than $1.7 million in union funds. Much of the take allegedly went toward a home, a three-car garage, a corporation owned by the business manager’s wife, and – if it can be believed – a campaign to establish political parties in the Arab state of Qatar.

6) Wisconsin passes Right to Work law. It’s hard to imagine an elected official anywhere in the country taking more heat from organized labor during this decade than Wisconsin Republican Governor Scott Walker. And somehow he’s managed to prevail. The protracted union campaign by public-sector unions to block and then overturn a new state law curbing collective bargaining and benefits appears to be exhausted, as their campaign to recall the governor fell short. Last March, something even more improbable happened: The legislature, at the urging of Walker, enacted a Right to Work law, making Wisconsin the 25th state in the nation to have done so. No longer can private-sector unions in Wisconsin force employees at unionized work sites to pay dues as a prerequisite for staying employed. Walker’s presidential campaign was short-lived. But his commitment to protect individual worker freedom will be a lasting legacy. And workers, if a Heritage Foundation report released last year is any guide, are unlikely to see a drop in their incomes.

5) National Labor Relations Board advances union interests. The Obama-era National Labor Relations Board once again has been the gift (to unions) that keeps on giving. In August, the NLRB ruled that a union could force a parent company, and not just a subsidiary, to the bargaining table even if the parent company has nothing to do with establishing wages, benefits or working conditions. This “joint employer” ruling, which involved a Teamsters local seeking representation at a California recycling plant, gives unions far more negotiating leverage. In addition, the NLRB in December 2014 issued its final “ambush election” rule, which went into effect this past April. This move enables to unions to put representation elections campaigns on a very fast track, giving employers far less time to respond and dissenting employees far less time to hear both sides of the issue. And while the NLRB, sensibly, ruled against granting collective bargaining standing to Northwestern University football players this past August, it did so on the merits of the case, not on the larger principle of whether college athletes should be considered employees.

4) Teamsters and the Justice Department reach agreement to lift federal oversight. The International Brotherhood of Teamsters has been operating under strict federal monitoring since the 1989 settlement of a civil RICO suit. There was a good reason for the arrangement: The Teamsters long had been a Mafia profit center all but in name. Last January, after years of persuasion by current IBT President James P. Hoffa and other leaders of the roughly 1.4 million-member union, the DOJ announced it would phase out control by the court-approved monitor, the Independent Review Board. The move may provoke ambivalence. On one hand, running the IRB cost taxpayers a few million dollars a year. The era of Mafia domination is long over. And the federal government ideally shouldn’t be running a union. Yet the Teamsters still know how to hide their dirty laundry. A supervised phase-out plan seems a reasonable compromise.

3) Corrupt Chicago-area Teamster fiefdom exposed.John Coli Sr. and extended family members are among of the most powerful, and unaccountable, figures in American organized labor. This July, they received some unwanted publicity when a Cook County, Ill. judge ruled that patriarch Coli and Teamsters Local 700, of which he is a trustee, were jointly liable for $2.3 million for abruptly breaking a building lease. The decision gave a boost to already ongoing scrutiny in this family’s style of doing business. Though well-compensated, the Colis are no strangers to self-dealing. That they usually have prevailed has a lot to do with their close connections with Teamster International President James P. Hoffa, Chicago Mayor Rahm Emanuel, and a succession of Illinois governors. John Coli Jr., a lawyer, has continued the tradition, collecting outsized fees from a front for the family-controlled Teamsters Local 727.

2) U.S. Supreme Court agrees to hear Friedrichs complaint. For almost four decades, unions have had the legal authority to force public employees to join or (in lieu of joining) pay “agency fees” that can run almost as high as full member dues. Supreme Court rulings over the years have enabled union dissenters to apply for rebates on fees deducted by their union for non-core functions, but have stopped short of declaring the deductions themselves to be unconstitutional. That could change soon. Last June, the High Court agreed to review a case brought forward by several California public school employees, led by an Orange County teacher, Rebecca Friedrichs. The plaintiffs are challenging the California Teachers Association’s authority to exact tribute from non-joiners, a suit that previously had been dismissed by the lower courts. The CTA, aided by other public-employee unions, is going all out to defeat this challenge. A victory for Friedrichs and other dissenters would be a resounding victory for the general public and for the Right to Work principle.

1) Union pension plans face insolvency. It is no secret that many union-driven retirement plans are severely underfunded. But the situation became a good deal more pronounced last year. Last September the Teamsters’ Central States Pension Fund, which enrolls over 400,000 active and retired workers, filed a restructuring request with the Treasury Department to cut benefits by almost 25 percent. In absence of such a measure, say trustees, the multiemployer-funded Central States plan is likely to go bankrupt, leaving beneficiaries dependent upon federal insurance in the form of Pension Benefit Guaranty Corp. The problem is that such a transfer of responsibility could trigger a multibillion dollar bailout of PBGC itself. In the union-dominated public sector, especially in Illinois and New Jersey, the problem also has become dire. In New Jersey, at least, the state Supreme Court in June allowed Republican Governor Chris Christie to delay two years of contributions worth $2.5 billion to the state system. Public-employee unions, true to form, have stepped up opposition.

(Dis)honorable Mention: U.S. Court of Appeals reinstates conviction of Richard Dressel, ex-business manager of New Jersey Electrical Workers local, for embezzling $350,000; Sharon Holmes, secretary-treasurer of a Postal Workers local in South Carolina, indicted for embezzlement and fraud totaling $220,000; Congressional Democrats, led by Sen. Bernie Sanders, revive pro-union card check legislation – different label, same contents; Richard Wayne Johnson, former secretary-treasurer of an Amalgamated Transit Union local in Phoenix, pleads guilty to ripping off union by nearly $275,000; United Food and Commercial Workers organizer Daniel Rush indicted in Oakland, Calif. federal court for fraud and extortion in connection with his receipt of over $500,000 in cash payoffs from marijuana dispensary operators in return for advice on how to avoid being unionized; Seattle City Council gives green light to Teamster local to organize Uber, Lyft drivers; Pennsylvania legislature removes “labor dispute” exemption in stalking/harassment cases following the convictions of Philadelphia Iron Workers members sabotaging construction sites; Glenn Robert Smith, comptroller of Michigan Regional Council of Carpenters and Millwrights, charged with embezzling $500,000; Washington D.C. security union boss Assane Faye charged with stealing over $300,000; Riverside police union office manager Alis Archibeque charged with $346,000 in thefts; TV news probe of Boilermakers local in Pittsburgh uncovers as much as $1 million in illegal spending by bosses; Romero family indicted for ripping off Inland Empire (Southern California) union of $900,000; former Detroit police union Vice President Paul Stewart sentenced in federal court for corruption during reign of convicted Mayor Kwame Kilpatrick; Screen Actors Guild unjustly denies disabled ex-stuntwoman Leslie Hoffman overdue health benefits, a case suggesting a widespread pattern; Steelworkers Missouri local treasurer Terry Aters indicted for embezzling over $150,000; law review article takes NLRB to task for lax enforcement of Beck rights; Manhattan Institute study reveals how Longshoremen threats of strikes or slowdowns raise shipping costs.